Saturday, February 9, 2013

"LPOs Stealing Deal Work from Law Firms"

That is the title of this video interview of  law firm consultant Kent Zimmermann of the Zeughauser Group.  In the interview, Zimmermann relates a story from a recent large law firm retreat in which one of the partners raised her hand and said that one of her major clients in the healthcare industry recently used Axiom in an M&A deal.  Not for due diligence.  They used Axiom for the whole deal.

For what it is worth, I think we have a language / perceptions gap at work here.  At least in the winter of 2013, the phrase "Legal Process Outsourcers" tends to connote masses of low-level attorneys toiling away doing low-level work in India, the Philippines, South Africa or in small or middle market cities in the U.S. -- i.e., a simple labor arbitrage play.  

But Axiom's competitive advantage is in understanding the clients' needs and working backwards to a solution.  The value here is in (a) listening carefully to the client (e.g., "we want the same or better quality but lower and more predictable pricing"), and (b) in designing and building a system that delivers that outcome.

For background on Axiom, read this eyeopening article, "Disruptive Innovation", from The American Lawyer.  Axiom has backing from Sandhill Road venture capital and Wall Steet private equity.  One of their investors is quoted, “Axiom has an opportunity to disrupt an industry that hasn’t materially changed in a century. ... With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."

Water runs downhill.  There is a lot of money to be made by making law more efficient and affordable.  Lawyers need to facilitate this outcome, not obstruct it, as society needs and wants better, more affordable access to legal solutions.  Process-driven legal services and legal products are the future.  Indeed, as the cyberpunk science fiction writer, William Gibson, once quipped, "the future is already here — it's just not very evenly distributed."

For my own views on the incipient revolution that threatens 100 years of established hierarchy, see "Losing the Law Business," Cayman Financial Review (Jan 2013); for the implications for legal education, see Section II.C of A Blueprint for Change.

[posted by Bill Henderson]

February 9, 2013 in Blog posts worth reading, Current events, Data on the profession, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (3)

Monday, February 4, 2013

"We Need a New Kind of Learner"

Via the Big Think, [though I added in the references to law students] BigThink

The 21st century requires a new kind of learner—not someone who can simply churn out answers by rote, as has been done in the past, but a student who can think expansively and solve problems resourcefully. The traditional academic skills of reading, ’riting, and ’rithmetic must be replaced with creativity, curiosity, critical thinking and problem solving, and collaborative and communication skills in order to solve the complex problems of tomorrow. ...

[I]magine that knowledge is a multisided box. When we teach [law students] to simply memorize material so they can pass tests, we give [law students] access to the knowledge on only one side of the box. So when life tosses this box up (as it certainly will), it may not land on a side that is visible and accessible. In this case, the [law students] don’t have access to the knowledge. ...

[Students] need to learn to navigate the course of acquiring knowledge—essentially, to get to the answers by being curious and coming up with a lot of questions, a lot of whys. They need to get accustomed to learning from different directions, playing with concepts, and figuring out how to ask the whys in order to gain access to knowledge. This process is more important than having the knowledge itself

The author is Ainissa Ramirez.  She is an author and science evalengist who recently wrote the ebook Save our Science: How to Inspire a New Generation of Scientists. I think the identical issues apply to law students.  Education needs to be cheaper, yes.  But to hold our society together, it also needs to be better.

[posted by Bill Henderson]

February 4, 2013 in Blog posts worth reading, Cross industry comparisons | Permalink | Comments (4)

Sunday, December 16, 2012

Job Meltdown and Debt Crisis Among Veterinary School Graduates

Dr_Clark_s_PictureA colleague passed along a link to a thought-provoking blog post by Dr. Andrew Clark, a veterinary doctor who runs a consulting practice on the business of veterinary medicine.  His business gives him a bird's eye view of the forces roiling the industry. 

Suffice to say, what is happening in the veterinary education, and the broader vet industry, is eerily close to the problems in legal education and the legal profession. 

Here is an excerpt of Dr. Clark's in-the-trenches view.  The post is titled, "Student Debt ... Our Best Thinking Got Us Here":

If you follow my blog or have worked with me, you already know that one of my favorite sayings is “our best thinking got us here.” That is certainly the case with the Veterinary Student Debt situation. We need some new thinking regarding what generates student debt and what hampers the ability of students to pay back the debt.

In the course of my management consulting business, I am fortunate to work at the interaction intersection between Veterinarians, Veterinary practices, Veterinary Colleges, Veterinary Students and Businesses that provide services and products to the veterinary profession. One of the most common and sincere concerns expressed by people in all of the groups is concern over the impact of student debt on the profession. The student debt situation is a circular process involving Veterinary students, Veterinary colleges, the AVMA, lenders and Veterinary Practices (employers).

I don’t have a solution to the problem but I have some observations and ideas that could be woven into the fabric of a different strategy for financing veterinary education. Although it may happen, my intent is not to offend everyone in the entire veterinary profession with one blog but rather to stimulate creativity and innovation.

Veterinary Compensation

Because the most common theme in discussions involving student debt is “Veterinary jobs should pay more,” I will enter the circle at the Veterinary Practice (employers) point. The assumption seems to be that every Veterinary business is profitable enough to pay whatever is necessary to cover student loans. When graduate Veterinarians enter the workforce a huge majority become employed by small businesses. No amount of marketing, posturing, denial or wishful thinking will change the fact that small businesses success or failure is driven by supply and demand.

From my position in the industry, in the economy in which we all work, the demand for veterinary services appears smaller than the supply of veterinarians. I routinely look at the financial statements of over 50 veterinary practices; equine, mixed and companion animal. Those financial statements demonstrate that practices do not generate enough profit to pay Veterinarians sufficiently to repay student loans under the repayment terms commonly available. That is a remarkably bad situation since the successful transfer of the Veterinary Profession from one generation to another is dependent upon the next generation being solvent and content.

Many practices are changing management practices to become profitable. That will help when practices generate enough earnings to add higher veterinary compensation to the cost structure of the business and remain solvent. Clearly compensation is not a realistic short term ‘fix’ until supply and demand for veterinary services shifts back to favor the Veterinarian.

Lenders ...

Lenders are rightfully concerned about security when they loan anyone money including students. Bankruptcy on student loans used to be a big loss for lenders. However, under the new regulations, student loans cannot be discharged by bankruptcy so there is significantly less risk now. [I wonder if the veterinary industry has its own Matt Leichter.]

Veterinary Colleges

When the dust all settles, Veterinary Colleges are in the business of selling Veterinary Medical Degrees to students who buy a degree with the intention of using it to make a living. In the age of austerity, Veterinary colleges have faced massive budget cuts. One response has been to increase class size, generating tuition revenue for the school. In effect, the colleges are generating more customers for their product and increasing the supply of veterinarians.

From my perspective and experience, the veterinary profession is upside down as far as supply and demand goes. We have inadequate demand for Veterinary services to support the number of veterinarians in practice. Increasing class size diminishes the earning potential and therefore the value of a Veterinary Medical degree yet the cost of the degree continues to escalate. That strategy only works for schools because student loans are easy to acquire and young consumers following their life’s dream are still willing to borrow the money to purchase the degree at an ever higher price with challenging terms. ...

AVMA Accreditation

It is difficult for me, a person working in ‘the business trenches’ of veterinary medicine, to understand the timing of the AVMA’s decision to accredit more schools. This clearly increases supply of veterinarians in the face of decreasing demand for veterinary services thereby reducing the value of a veterinary degree and the earning power of a veterinarian, both of which contribute to student debt management challenges.

Another component of accreditation that is an integral part of the challenge of rising student debt is the requirement to have a research program in order for a school to be accredited by the AVMA. The paradigm that effective teaching of veterinary students requires faculty involved in a research programs has never been assessed to be of measurable benefit to student success in general or even specialty practice.

In general, Assistant, Associate and Full Professor ranked positions are allotted 50% FTE (Full Time Equivalent) in non-teaching functions which include research. Who is paying for that 50% of their time? Many veterinary schools have chosen to hire instructor level individuals that are nearly 100% FTE in teaching to release higher ranked faculty to do research. Why are these instructors that do no or very little research acceptable as educators, when the need for research to enhance education is the paradigm?

The world is changing around us and we need to have a fresh look at research program requirements for accrediting schools. It is impossible to understand how the cost of faculty in 50% FTE positions is not passed along to the student in the form of tuition fees, etc. That component of tuition is financed by student debt. ...

Epilog[ue]

This blog is aggregations of realities that I observe in the course of helping veterinarians manage their businesses and new graduates manage their debt. Although I am not in a position to resolve these challenges, I am in a position to share my observations and invite people in policy making capacities to use some new thinking. After all, our best thinking got us here. ....

[posted by Bill Henderson]

December 16, 2012 in Blog posts worth reading, Cross industry comparisons, New and Noteworthy | Permalink | Comments (14)

A Virtual Lawyer Speaking Crowdsourced Wisdom

PopularmechanicsAccording to this article in Popular Mechanics, virtual lawyers speaking crowdsourced wisdom is one of 110 predictions that will  come to pass over the next 110 years.  The occasion is the 110th anniversary of this revered magazine. Here is the blurb:

A virtual lawyer will help you plan your estate. "I don't mean avatars," Cisco's Dave Evans [Cisco's chief futurist] says. "I mean virtual people—self-contained, thinking organisms indistinguishable from humans." Sounds crazy, right? But surely you've seen the magic of CGI [Computer Generated Imagery]. What's to say you can't attach a lifelike visage to an interface fronting the crowdsourced wisdom of the Internet? Give it a nice head of hair, teach it how to smile, and you're looking at a brilliant legal eagle with awesome people skills.

If this makes you worried, note that the magazine also predicts annual physicals being done through a cellphone app.

December 16, 2012 in Blog posts worth reading, Cross industry comparisons, New and Noteworthy | Permalink | Comments (2)

Wednesday, December 5, 2012

Predictive Coding is a Disruptive Innovation that will Change How Law is Practiced

PredictivecodingdummiesI have been reading about predictive coding for a few months now, and that is my conclusion.  Predictive coding is the use of computer algorithms and machine learning to conduct the review of electronically stored information (ESI).  For a useful primer, see Frederick Kopec, Predictive Coding in eDiscovery or Predictive Coding for Dummies (remarkably, there are two editions, one by Symantec and the other by Recommind, see Legal Tech Insider, A Tale of Two Predictive Coding Books).

From the client perspective, predictive coding is at least as good as first-level human review (typically junior attorneys screening for relevance and privilege) but dramatically less expensive.  And note, whatever efficiency and accuracy benefits predictive coding has today, it will only improve in the months and years  to come.  It contrast, our processing capacity as humans is, well, static.

KrollontrackThe big players in the space are Kroll Ontrack and Recommind. These are not insignificant companies.  Kroll Ontrack started as a hard disk recovery service and evolved into the e-discovery and information management services. It now employs 1,500 workers in eleven U.S. and nineteen foreign locations around the world.  In 2010, Kroll Ontrack had revenues of $250 million. A few layers up, it is owned by the Private Equity giant Providence Equity Partners

RecommindRecommind has approximately $15 million in annual revenues and approximately 100 employees spread over facilities in Massachusetts, California, London, Germany, and Australia.  According to this June 2012 story at the CIO Agenda at Computer Business Review, Recommind is gearing up to go public.

Howard-SklarHoward Sklar, Senior Corporate Counsel for Recommind, just posted an essay entitled, Legal Acceptance of Predictive Coding: A Journey in Three Parts.  The parts are: (1) acceptance that predictive coding reasonable, (2) arguments that it is better and thus must be used in this case, (3) sua sponte judicial order that it be used. The fourth part, still to come argues Sklar, is a state bar ethics watchdog issuing a ruling that failure to use predictive coding is unethical. 

Here is an excerpt from Sklar's post:

There’s a certain trajectory for technology adoption.  Early adopters, mainstream acceptance, laggards.  But, slow or fast, adoption occurs.  The law is the same way, in its own fashion.  But the legal acceptance of predictive coding has had a path that’s unorthodox.  From the legal perspective, predictive coding has gone through three cycles, not entirely as expected.

In cycle one, companies began using predictive coding.  The efficiencies are compelling.  Better end results in less time at a cost savings.  An ability to better find and understand the facts embedded—sometimes hidden—in your documents.  These things are crucial in today’s corporate world.  Law firms were slower, but generally followed their clients into predictive coding, and soon saw the benefits first hand.

Other vendors—usually the first to adopt new technology—were laggards.  They fought the adoption of predictive coding as long as they could, mainly because they didn’t have the capability to do it themselves.  Eighteen months ago, the most frequent question I would get at conferences was “has there been a court case approving the use of predictive coding?”  In the “ridicule it and it will go away” marketing approach, they were hoping to scare corporations and law firms away from the benefits corporations could achieve.

Then came Da Silva Moore and Global Aerospace [which, against the objections of one of the litigants, ruled that predictive coding was a judicially reasonable method of conducting discovery.]  ...

During this period, other vendors stopped criticizing predictive coding and started marketing it—sometimes with the capability, sometimes without.  ...

After waiting for the first decision approving the use of predictive coding, we went to stage two faster than anyone had thought possible: not whether you can use predictive coding, but whether you must use it.  This was the argument in the Kleen Products case.  The defendants had completed their review, and the plaintiffs’ argued that the review was defective because predictive coding wasn’t used.  Eventually, the parties cooperated to end that dispute, but the argument had been made. ...

We’re now in stage three: a court has sua sponte ordered the use predictive coding.  And not just any court, the Delaware Chancellery Court, one of the most important corporate courts in the nation.

In the future, we’ll enter stage four: the decision by a state bar’s ethics watchdog that failure to use predictive coding is ethically questionable, if not unethical.   After all, purposefully using a less-efficient, less accurate, more expensive option is problematic.  I think that’s probably 18 months away.  But given how fast we’ve gone through the first three states, stage four may come next week.

[posted by Bill Henderson]

December 5, 2012 in Blog posts worth reading, Data on the profession, Innovations in law, New and Noteworthy, Structural change | Permalink | Comments (0)

Sunday, December 2, 2012

More on Big Data

Below is an interview of David Cowen by Monica Bay, editor-in-chief of ALM's Law Technology News.  The topic is Big Data.  The interview provides a useful glimpse on how this trend is corporate America is taking hold.  It should be of great interest to lawyers because (a) it has enormous economic value, and (b) it raises novel privacy issues.  Which will predominate? [posted by Bill Henderson]

December 2, 2012 in Blog posts worth reading, Cross industry comparisons, Current events, New and Noteworthy, Video interviews | Permalink | Comments (0)

Wednesday, November 21, 2012

An Open Letter to India's Graduating Classes

From far away, knowledge workers in India appear to be a formidable and growing threat to American college graduates.  But according to Mohit Chandra's essay, "An Open Letter to India's Graduating Classes," which appeared in the India Ink section of the NY Time/International Herald Tribune, the current generation of Indian university and professional school graduates is hindered by a serious skills and values gap.   MohitchandraIndeed, the author, a partner at KPMG in Delhi, chastises the newly minted 2012 graduates for being spoiled and behaving unprofessionally. 

There are two crosscurrents at work here that are quite difficult to untangle: (1) the process of globalization, which is linking together the economies--and thus the cultures--of India and the U.S.; and (2) workplace generational frictions, which apparently are just as vexing in India as they are in the U.S.  As a mid-career Indian professional with an MBA from Ohio State and a work history that includes KPMG, Capital One, McKinsey & Company, and Ernst & Young, Chandra sits on top of both of these faultlines. 

I think Americans might be surprised by both the content and tone of Chandra's letter, which cannot be judged by western standards.  The letter reveals as much about the U.S., and humanity, as it does about India.  Quite a read.

Dear Graduates and Post-Graduates,

This is your new employer. We are an Indian company, a bank, a consulting firm, a multinational corporation, a public sector utility and everything in between. We are the givers of your paycheck, of the brand name you covet, of the references you will rely on for years to come and of the training that will shape your professional path.

Millions of you have recently graduated or will graduate over the next few weeks. Many of you are probably feeling quite proud – you’ve landed your first job, discussions around salaries and job titles are over, and you’re ready to contribute.

Life is good – except that it’s not. Not for us, your employers, at least. Most of your contributions will be substandard and lack ambition, frustrating and of limited productivity. We are gearing ourselves up for broken promises and unmet expectations. Sorry to be the messenger of bad news.

Today, we regret to inform you that you are spoiled. You are spoiled by the “India growth story”; by an illusion that the Indian education system is capable of producing the talent that we, your companies, most crave; by the imbalance of demand and supply for real talent; by the deceleration of economic growth in the mature West; and by the law of large numbers in India, which creates pockets of highly skilled people who are justly feted but ultimately make up less than 10 percent of all of you.

So why this letter, and why should you read on? Well, because based on collective experience of hiring and developing young people like you over the years, some truths have become apparent. ...

There are five key attributes employers typically seek and, in fact, will value more and more in the future. Unfortunately, these are often lacking in you and your colleagues.

1.You speak and write English fluently: We know this is rarely the case. Even graduates from better-known institutions can be hard to understand.

Exhibit No. 1: Below is an actual excerpt from a résumé we received from a “highly qualified and educated” person. This is the applicant’s “objective statement:”

“To be a part of an organization wherein I could cherish my erudite dexterity to learn the nitigrities of consulting”

Huh? Anyone know what that means? We certainly don’t.

Continue reading

November 21, 2012 in Blog posts worth reading, Cross industry comparisons | Permalink | Comments (2)

Wednesday, November 7, 2012

"2012 was the First Moneyball Election"

So concludes John Sides (GW Political Science) at The Monkey Cage.  John writes:

Barack Obama’s victory tonight is also a victory for the Moneyball approach to politics.  It shows us that we can use systematic data—economic data, polling data—to separate momentum from no-mentum, to dispense with the gaseous emanations of pundits’ “guts,” and ultimately to forecast the winner.  The means and methods of political science, social science, and statistics, including polls, are not perfect, and Nate Silver is not our “algorithmic overlord” (a point I don’t think he would disagree with).

But 2012 has showed how useful and necessary these tools are for understanding how politics and elections work. ...

And a fitting comic courtesy of xkcd:

Electionmath

[posted by Bill Henderson]

November 7, 2012 in Blog posts worth reading, Current events, New and Noteworthy | Permalink | Comments (3)

Thursday, September 20, 2012

The Eds and Meds Sector

There is a fascinating story at newgeography which looks at trends in the education ("Eds") and medical ("Meds") sectors. 

Newgeography focuses on trends in urban affairs and economic geography.  Eds and Meds are of interest to this group because these two sectors have been such a critical part of maintaining or restoring many regions' economic vitality.  Why?  Universities and hospitals generally pay high wages, don't lay people off, and are perceived as long term drivers of growth because more degrees and longer life spans are two trends that will probably continue. 

But the author, Aaron Renn, presents compelling trend data suggesting that America can no longer to afford extra large helpings of Eds and Meds.  As shown in the chart below, these sectors have been growing faster than virtually all other sectors for a long, long time.

Renn-eds-meds-1

Renn points out the healthcare is on its way to consuming 20% of our GDP by the year 2021.  And the growth in the higher education sector has been substantially fueled by student loans.  Unfortunately, even college grads are subject to the pressures of outsourcing and competition with very able professionals from around the globe.  So the ability to repay all that debt can't be taken for granted.  What can't go on forever, won't.

Here is another chart presented by Renn, this one presenting the rates of inflation occuring in Eds and Meds sectors as compared to the overall CPI:

Renn-eds-meds-2
KaplanThere is an opportunity here.  I would be extremely bullish on innovations that produce productivity gains in the Eds and Meds sectors.  I recently listened to this HBR Ideocast discussion with Robert Kaplan, the Harvard Business School professor best know for developing the Balanced Scorecard.  Kaplan is now turning his considerable intellect toward the problem of cost-containment in healthcare. 

What the key insight?  Measuring how much patient treatment actually costs--to date, there has been almost no sophisticated cost accounting in healthcare.  Most of the brainpower has gone to dealing with (and maximizing) third party reimbursements.  Under Kaplan's system, fortunately, we can actually identify the points in the system that cost way too much and thus begin the reengineering process.

ChristiansenThe same thing may soon be happening in higher ed.  Another Harvard Business School professor, Clayton Christiansen, who authored the renowed business book, The Innovator's Dilemma, recently co-authored a letter that called for colleges and universities to quit chasing prestige and start focusing on innovations that improve educational quality without increasing price.  Remarkably, the letter was included in a mass mailing by the American Council of Trustees and Alumni -- going to 13,000 trustees!  See Inside Higher Ed, Distruption's Strange Bedfellow, July 12, 2102.  Another Insider Higher Ed story suggests that this may be the true faultline driving the University of Virginia controversy.  See Disruptive Innovation: Rhetoric or Reality?, June 26, 2012.

The world appears to be changing, even in Eds and Meds sector.

[posted by Bill Henderson]

September 20, 2012 in Blog posts worth reading, Cross industry comparisons, Current events, Important research, New and Noteworthy, Structural change | Permalink | Comments (1)

Sunday, September 2, 2012

"There is a Shortage of Skilled Workers"

That is the message delivered by Patricia Milligan, president of Mercer's human capital business.   Who are the workers she is talking out?  Managers, technicians and executives working inside the world's biggest companies.

I realize that many lawyers and law professors are likely to be skeptical of the pronouncements of human capital consultants.

But for a moment, let's take Milligan at face value.  So, what are the skills in short supply?  Milligan does not answer that question in the above video.  But in the video on this webpage she suggests that such skills are  a combination of communication, colloboration, and data analytic skills. 

Note that Milligan thinks the talent shortage problem is too big for employers to solve on their own.  This is leading to collaborations with academic institutions.  Are law schools ready for such a step?

[posted by Bill Henderson]

September 2, 2012 in Blog posts worth reading, Cross industry comparisons, New and Noteworthy, Video interviews | Permalink | Comments (1)

Saturday, September 1, 2012

"Application, Discipline, Focus, Repetition"

For the Labor Day weekend, I thought I would post this video of Henry Rollins, an American singer and artist who has continually reinvented himself since he left his job as a manager of a Hagen-Daaz ice cream store in 1981 to become the lead singer in Black Flag.

The point of posting this video is not to glorify Henry Rollins, but to consider, on its own terms, the life narrative of one interesting person. Rollin's formula of "application, discipline, focus, repetition" sounds a lot like deliberate practice.  Based on my own research, I have broken this process into two steps:

  1. Identifying the core elements needed to be become an expert or master in a specific domain -- Jeff Lipshaw was alluding to this in his post on Donald Schon and reflective practice;
  2. Practicing, through thousands of hours of effort, on elements that one lacks in order to move along the continuum to mastery.  Number 2 works best when the person has the benefit of feedback and coaching.  Of course, they also have to be willing to do the work.

For an individual, it may not be necessary to formally break down the core elements into specific pieces.  Instead, these pieces can be obtained iteratively through trial and error and reflection.  I think this is what Rollins has done. It is a formula that works for one highly determined person.  But can it be scaled?

As an educator, I am interested in making the components of practice mastery more explicit and transparent--this is step #1 above.  To  accomplish step #1, we still need to do foundational research that  deconstructs the careers of outstanding lawyers into sets of specific skills, abilities, and competencies--i.e., the things to be practiced.   (Notice I said "sets" -- outstanding lawyers often master different domains.)  At present, the Shultz-Zedeck Effective Lawyering study is the only solid published research that is even adjacent to this topic.

Once these components of effective lawyers are identified--i.e., a law school identifies the skills, abilities and competencies it wants to develop over the course of three years--we move to step #2.  This step raises complex questions of order (which competencies first, which come second, etc.) and pedagogy (best and most cost-effective methods) and measurement (how do we know we have made progress?).   I think the answers would have to come iteratively, through trial and error. 

Any educational institution pursuing this strategy would have to commit itself to studying and continuously improving the educational process.  For law schools, this would be new.  At the vast majority of law schools, we mostly teach legal knowledge, we don't articulate our intended educational outcomes, we let students pick their courses ala carte with minimal guidance, and we don't engage in serious measurement. But we could.  I think this is the next great frontier--an enormous opportunity for any law school willing to think for itself, to experiment and to change.  The data needed would come from one's own alumni, ideally supplemented with data sharing within a law school consortium.

[posted by Bill Henderson]

September 1, 2012 in Blog posts worth reading, Cross industry comparisons, Innovations in legal education, Video interviews | Permalink | Comments (1)

Wednesday, August 15, 2012

Changing Conventions of What Counts as Serious

Tom-goldsteinOver at the Volokh Conspiracy, Orin Kerr (GWU Law) links to a fascinating interview with Tom Goldstein, the Supreme Court advocate who started the SCOTUSblog many years ago in the early days of the blogosphere. 

Goldstein's comments on the evolution of SCOTUSblog throw into sharp relief how the online world is gradually creating new institutions that chafe against established conventions of what is professionally or academically serious.  I am not kidding -- 50,000 visitors to the site a day, including hundreds or even thousands from inside the Supreme Court itself.  In comparison, Harvard Law Review has an annual subscriber base of 2,000 total.  (Goldstein mentions this in passing--the absolute pitch perfect way to deliver news like this.)

ScotusblogAnother interesting point made by Goldstein was how SCOTUSblog was originally started as a vehicle for marketing Goldstein's firm.  Yet, as readership took hold, he completely abandoned any attempt to directly advance the interests of his firm through editorial content--the benefits of cultivating a perception of objectivity were very indirect but ultimately much greater.  So journalistic firewalls have been erected.  If his firm is handling a case before the Court, or making a filing, it not discussed on the blog by anyone from the firm.  Outside commentators handle any relevant commentary.  Objectivity and thoroughness are the goals.

SCOTUSblog has also gravitated away from analysis done by students at Stanford and Harvard, where Goldstein runs Supreme Court clinics, to analysis by leading subject matter experts. (In the legal academy, we are often clamoring for peer review -- well, Goldstein has acheived it.) SCOTUSblog now runs well-attended symposia.

Folks, SCOTUSblog has become a highly influential institution that is closely followed by the Supreme Court itself.  And it started as a blog.  In fact, it still is a blog.  Based purely on reach and influence, it is more serious than any center operating out of a law school. 

Perhaps it is time for us to be more openminded about what "counts" as serious.  What Goldstein has created looks very serious to me.  (H/T to Orin Kerr for directing me to this excellent video.)

[posted by Bill Henderson]

August 15, 2012 in Blog posts worth reading, Government lawyers, Video interviews | Permalink | Comments (6)

Friday, August 10, 2012

Federal Funding of Higher Education--A Bubble that is Going to Burst

NPR's Planet Money has a story on interplay between higher college and university tuition and changes in financial aid.  As shown in the graphic below (from the College Board), the federal government is assuming a larger role in finaning higher education. Every other source of funding is shrinking its a proportionate contribution to financial aid.  Despite favorable bankruptcy laws enacted in 2005, the federal takeover of higher ed financing has almost completely muscled out the private lenders.

Gr-pm-studentfinances3column-462

Coincidentally, a colleague forwarded to me a pointed commentary from zerohedge.com, which suggests that recent comments by Ben Bernanke portend serious financial instability.  In 2007, Bernanke said:

"At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained" - March 28, 2007.

Two days ago, Bernanke said:

"I don’t think student loans are a financial stability issue to the same extent that, say, mortgage debt was in the last crisis because most of it is held not by financial institutions but by the federal government" - August 7, 2012

Now take a look at the federal government's holding of consumer debt (overwhelmingly student debt that has piled up since the 2010 legislation). See Henderson & Zahorsky, The Law School Bubble, ABA Journal (Jan. 2012).

Collegedebt

Student loans are viewed as "assets" by the federal government ... until they become uncollectable, in which case the value of the assets eventually has to be adjusted through write-downs, just like mortgages in the mortgage crisis.  Extensive use of Income-Based Repayment makes it possible for a student loan to be simultaneously uncollectable but not in default.

Folks, I am an unapologetic New Deal Democrat.  But the current "system" of federal higher education financing is near perfect insanity.  We set tuition and, no questions asked, the federal government writes us checks in exact proportion to students' willingness to sign loan papers.  For young people who have never worked, it is all like Monopoly money. 

The only way the math works is if the real earnings go up en masse for virtually all college and professional school graduates.  In a rapidly globalizing world in which our students are competing against Chinese and Indian professionals, the assumption of mass rising real incomes is implausible.  See, e.g., views of economist Alan Blinder in this NPR article.

Right now we--higher ed and the nation as a whole--are maintaining the illusion of prosperity through debt financing heaped on naive young people.  This is immoral in the extreme.  Moreover, in the long run, it is economic and political ruination.

The only long term solution is cost containment imposed on higher ed by reforming the terms of federal financing.  The financing has to incentivize educational productivity -- i.e., fewer tuition dollars expended to obtain better skills and learning as measured by marketplace earnings and innovation.  No more $100,000 checks from the federal government for sorting students by standardized test scores.  Our graduates will actually have to think, collaborate, communicate and problem-solve at a very high level.  How many of my fellow law professors grasp the depth of our problems?  Not enough.

[Posted by Bill Henderson]

August 10, 2012 in Blog posts worth reading, Cross industry comparisons, Current events, Structural change | Permalink | Comments (9)

Friday, August 3, 2012

Connecting the Dots on the Structural Shift in the Legal Market

Over a 3 Geeks, Toby Brown asks, "Is the legal market flat?"  Toby's analysis is especially interesting because of his day job -- he is a strategy professional at an AmLaw 50 firm who focuses on pricing and market analytics.  In that capacity, he has access to the various proprietary databases that track legal spending.  Toby writes, "Although there have been minor ups and downs on this stat (most recently a slight up-tick), the overall demand has been and continues to be predicted as … flat."

But then Toby wonders if the stats are potentially misleading because the databases define the market as BigLaw. If work is leaking out of this market and going to new entrants, flat revenues may mask a reconfiguration of the legal marketplace--one where BigLaw is less dominant.

Pangea3As evidence for this possible trend, Toby links to an article on Pangea3, which is a legal process outsourcing (LPO) owned by Thomson-Reuters (a publicly traded company).  Since its inception in 2003, Pangea3 has grown at "40% to 60%" per year and is "growing even faster" in 2012.  Pangea3 now employs 850 lawyers, mostly in India.

Now think about that: 850 lawyers growing at 50% per year for five years is 6,455 lawyers--by 2017.  And that is just one LPO.  

HuronHuron Consulting Group (NASDAQ: HURN) recently issued a press release announcing a new document review and data operations facility in Gurgeon, India (functionally a booming suburb of India--I've been there).  The press release reads, "The Company offers around-the-clock global discovery support with 1,500 seats at nine locations across the U.S., U.K., and India to address clients’ complex business needs."  MindcrestAs I noted in an earlier post, Mindcrest, with HQ offices in Chicago but facilities in India, is also growing at a breakneck pace.

Toby draws a conclusion: "The simple math of 50% market growth suggests LPOs are taking market share from firms." 

In my estimation, very few lawyers or law professors grasp what is taking place here.  We look at flat revenues in BigLaw and draw the inference that we are in a prolonged recession.  Meanwhile, the legal business is absolutely booming in India, thanks in substantial measure to its integration into the U.S. and U.K. legal supply chain.  Play these trends forward for five more years, and the prolonged recession storyline will no longer be credible. 

And remarkably, the drivers of this change are publicly traded companies or companies funded by venture capital and private equity.

Beyond Toby's observations, I would add the following to the big picture. The ABA Commission on Ethics 20/20 was recently pressured to drop its recommendation for even a very most modest change to the Rule 5.4 prohibition on fee splitting with nonlawyers.  (see here.)  This effort was lead by the Illinois State Bar Association, which wanted to shut down debate on this topic during the August ABA Annual Meeting in Chicago. 

I fear that the U.S. legal profession is looking through the wrong end of the telescope.  In a practical sense, fee spliting only applies to counseling and advocacy.  But the full legal supply chain includes a host of legal products and inputs that Wall Street and Sand Hill Road capitalists are anxious to supply.  This supply chain analysis is especially true when the client is a Fortune 500 corporation.  The policy that drives fee-splitting is consumer protection and a belief that the nonlawyer profit motive will compromise lawyer independence and injure the client.   Yet, organizational clients want innovation and more for less.  And they are finding non-law firm vendors who are filling that need.   The organized bar is powerless to stop these changes. 

[posted by Bill Henderson]

August 3, 2012 in Blog posts worth reading, Current events, Data on the profession, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (4)

Friday, July 27, 2012

Cool Infographic on the Legal Services Industry

A really compelling way to convey a lot of important information.  I continue to be blown away by the volume of innovation I am seeing, mostly around interconnectivity.  (H/T: Greg Voakes at Business Insider)

The New Lawyer - Trends that are reshasping the Legal Industry

[posted by Bill Henderson]

July 27, 2012 in Blog posts worth reading, Data on legal education, Data on the profession, New and Noteworthy | Permalink | Comments (3)

Monday, July 16, 2012

"The Toppling of Top-Tier Lawyer Jobs"

That is the title of a just-posted essay by Catherine Rampell at the NY Times Economix Blog.  She studies several years of the bi-modal distribution.  It is refreshing to have a capable journalist review the data and marvel at the strange ways of our industry.  

[posted by Bill Henderson]

July 16, 2012 in Blog posts worth reading, Current events, Data on legal education, Data on the profession | Permalink | Comments (0)

Sunday, July 8, 2012

A "Complicated Marxist"

The Big Think just posted a wonderful video of Slovenian philosopher Slavoj Zizek, who describes himself as a "complicated Marxist" because he holds in his mind simultaneously the virtues of individual capitalists with the problems of domination and inequality that are endemic to the capitalist system.  

I am posting the Zizek interview here because many of the problems currently afflicting legal education and the legal industry that I write about here are, more formidably, mere symptoms of broader problems that flow from a rapidly globalizing world economy--a topic so complex that we seldom acknowledge it.  That said, Frank Pasquale, in a post called "Jobless Futures," does an admirable job of cataloging our collective confusion. 

Zizek suggests that the solution to engage in serious thinking rather than misguided, ill-conceived activism.  Ah, now this should be the competitive advantage of a university-based graduate-level law degree--in addition to practical lawyering skills, we should be practicing with our students the science and art of critical thinking.  The best lawyers sidestep ideology and can think through issues on par with Zizek, whom we don't have to wholly agree with to admire.

[posted by Bill Henderson]

July 8, 2012 in Blog posts worth reading, Current events, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (1)

Thursday, July 5, 2012

Which law schools lose the most when applicants decline?

This is a simple question of great practical importance to many law schools, yet very few law school administrators understand how to answer it.  Who would have thought that clarity would be supplied free-of-charge by an underemployed recent law school graduate? 

Matt_LeichterBut that is what is happening now, in "Tough Choices Ahead for Some High-Ranked Law Schools," an Am Law Daily essay written by Matt Leichter, one of the silver linings of the declining legal job market -- and there aren't too many.  Matt is a J.D.-M.A. in law and international affairs from Marquette University who passed the New York bar in 2008, finished his masters work in 2009, and then moved to the Big Apple as the bottom was falling out of the entry level market.  Unable to find conventional legal employment, Matt started doing freelance writing on law-related topics. 

With plenty of time on his hands, Matt turned his graduate-level quantitative skills to the task of analyzing a law school education market that seemed unsustainable.  Matt first put his analyses on display at the Law School Tuition Bubble.  His writings eventually attracted the attention of The American Lawyer, which has now published several of his data-driven essays.

Here is what sets Matt apart. 

  • He digs very deep for facts and, in turn, uses one of his biggest asset --time -- to build datasets that answer important and relevant questions
  • He is non-ideological.  Just facts and factual analysis.
  • He writes about complex technical stuff in an accessible, credible way

Matt has all the core skills of a truly great lawyer.  Finding no takers, the entire legal education establishment benefits by Matt channeling his time, energy, and considerable intellect into relevant topics crying out for dispassionate analysis.

His "Tough Choices" essay is a real gem.  Here is the bottomline:  This year's applicant cycle likely will deliver its greatest blow to US News Tier 1 schools who generally admit students who were angling to get into even higher ranked schools.  This inference can be teased out of the ratio of applicants to offers (selectivity), and offers to matriculants (yield).  

To conduct this analysis, Matt had to cull data, school-by-school, from several years of the ABA-LSAC Official Guide to Law Schools (aka "the Phonebook"). But it enables him to produce the chart below:

Applications_acceptances1

What this chart says is that admissions officers have to read more applications and make more offers to fill their entering classes.  Based on the data in Matt's chart, in 2004, for all ABA-accredited law schools, there was a 24% acceptance rate, and a 31% yield from those offers.  In 2010, the acceptance rate went up to 31% (schools were being less selective) and the yield went down to 25% (fewer showed up to enroll). 

Applicant volume may be declining, but the trends above suggest that there is a lot more "competitive shopping" going on. Why? Because information costs are going down and prospective students are adapting.  And this year is bound to be the most aggressive year ever.  According to this NLJ story, It's a Buyers' Market for Law School, virtually every student is now negotiating for scholarship money.

Declining applicant volume, shifting yields, and highly informed consumers make it very difficult for law school administrators to lock in their LSAT and UGPA numbers, which schools generally fixate on because of U.S. News ranking.  This produces pain in one of three ways:

  1. The school shrinks the entering class (announced by at least 10 schools), which severely tightens the budget
  2. The school buys its class through financial aid, which blows a hole in the budget (happening here)
  3. The school significantly relaxes the LSAT and UGPA and braces for a drop in the rankings because its peers are pursuing strategies #1 or #2.

#1 and #2 may seem like the prudent course, but a central university won't (more likely can't) provide a financial backstop for more than a year or two, if that.  If the admissions environment does not change dramatically, which seems unlikely, some combination of layoffs, rankings drop, or closures will have to be put on the table.

Matt's ingenuity is on full display when he demonstrates, with data, the profile of the most vulnerable schools -- and its a far cry from the bottom portion of the U.S. News rankings. 

  • Low accept/high yield (think Yale and Stanford) are safe. 
  • High accept/high yield are also fine.  They are nonprestigious but have strong regional niches or missions. Tier 3 or 4 designation means nothing.
  • Low accept/low yield crowd -- a bunch of Tier 1 schools -- are vulnerable to significant rankings volatility.  If they drop, next year's applicant volume will be affected, making it very difficult to rebound.
  • High accept/low yield are the most likely to close.

Until August and September, when the wait lists finally clear, nobody really know the depth of market shift.  Only then can the budget holes be finalized.  Deans will then have candid conversations with their central administrations to answer the question, "Is this downward trend permanent?"

[posted by Bill Henderson]

July 5, 2012 in Blog posts worth reading, Current events, Data on legal education, Important research, Structural change | Permalink | Comments (1)

Monday, July 2, 2012

Betting on the Next Generation of Law School Graduates

CrittendenTwo years ago, I got a call from Jack Crittenden, the editor-in-chief of The National Jurist, a publication targeted at law students.  Jack asked me if I would be interested in writing a column for the magazine. 

After thinking over the offer, I concluded that it would be a good way to "diversify" my intellectual capital.  Many of my ideas are outside the legal academic mainstream and are critical of the status quo.  Yet, I reasoned that law students would be one group more inclined to give me a fair hearing.  Why?  Because in 2010, as in 2012, a disproportionate number of students were/are getting shortchanged by a miserable job market.  When the status quo closes its door on you, the mind naturally becomes open to new ways of viewing the world.  Further, regardless of the current job market, for the next 20 years the influence of this generation of law students will only grow.  

So I accepted Jack's offer and started writing. I will be eternally grateful to Jack for making me that offer (and eternally grateful for tenure, which provides the platform for the long term and the unorthodox).

When I started writing the National Jurist columns, I never quite knew how they would end.  In an attempt to break down the distance between the student and the professor, I recounted some of my own (inglorious) law school experiences.  Unconstrained by form, I just wrote what was honestly on my mind to an audience I really cared about.  It was refreshing, that's for sure, but much to my surprise, these essays seemed to boil down my academic ideas into something useful and practical.  The emails I started receiving from students suggested that I was making progress.

Ironically, the National Jurist writings are now influencing my academic work, including several essays I am writing this summer on legal education and the legal industry.  Yet, the true virtue of those essays may be their brevity.  So, in case you are curious about the subversive ideas I am passing along to our youth, with Jack's permission, I am republishing several of these essays on the Legal Whiteboard.

[posted by Bill Henderson]

July 2, 2012 in Blog posts worth reading | Permalink | Comments (0)

Wednesday, June 13, 2012

The Dangers of Being Smart

BigThinkI just read a short essay at the Big Think, "The Dangers of Being Smart," that reminded me of nearly every faculty workshop I have ever attended.  In a nutshell, brilliant people -- and law faculty are filled with them -- can wax eloquent on cognitive bias, yet the deft ability to describe and comprehend does little to enable brilliant people to rein in the bias.  In fact, being smart can be disadvantageous because we fall in love with the beauty and nuance of our own rationalizations and justifications.  

This really hit home for me because I have witnessed hundreds of examples in which data are never sought out or consulted because the brilliant lawyers were so persuaded by their own reasoning. (And I stipulate that I am sure I have done this many times myself.)   Or worse, good but not perfect data are dismissed because a lawyer or law professor could theorize a plausible flaw in the sample or methodology.  The glee in finding the flaw then shortcircuits the right response, which is a simple discussion of probability -- that is, what is more or less likely based on all available evidence.

KahnemanThe Big Think essay reminded me of Dan Kahneman's Thinking, Fast and Slow, especially the section titled "Overconfidence."  Kahneman, a psychologist, won the Nobel Prize in economics because he, along with co-author Amos Tversky, identified several predictable, recurring cognitive biases in human decisionmaking. 

Kahneman later revealed that the basis for their breakthrough research was errors they detected in their own judgments.  “People thought we were studying stupidity,” said Kahneman. “But we were not. We were studying ourselves.”   For a wonderful primer on Kahneman's unusual worldview, see this Michael Lewis essay.

[posted by Bill Henderson]

June 13, 2012 in Blog posts worth reading, Cross industry comparisons, Important research | Permalink | Comments (0)